Market Updates

The Federal Reserve is expected to begin rate cuts this week, but despite market anticipation of sharp reductions, persistent inflation from fiscal policies and structural forces may limit the extent of cuts, with recession fears being overstated.

The Federal Open Market Committee meeting this week is expected to signal the start of the easing cycle, while other key events include central bank meetings from the Bank of England and Bank of Japan, alongside major economic data releases such as US retail sales, Eurozone and UK Consumer Price Index, and Japan Consumer Price Index.

BlackRock anticipate market volatility leading up to the U.S. election, shift from U.S. tech to broader AI opportunities in equities, and favor medium-term Treasuries and quality credit over short-dated Treasuries, as they expect less aggressive Federal Reserve rate cuts than markets predict.

This week’s key events include the US presidential debate, inflation data (CPI, PPI), potential ECB rate cut, and Apple’s iPhone 16 launch, while broader market focus will be on US inflation as the Fed approaches its next decision, alongside softer global economic data and concerns over China’s economic outlook.

Investors are weighing whether future revenues justify massive AI investments by top tech and cloud firms; BlackRock remain overweight on AI but will reassess if revenue growth stalls or AI adoption slows.

The upcoming week is packed with significant economic data releases across the UK, Europe, and the US, offering insights into manufacturing, consumer spending, trade balances, and labor markets, culminating with the highly anticipated US Nonfarm Payrolls report and UK PMIs.

This week’s economic focus shifts from Europe’s subdued data releases to the U.S., where key economic reports and the Jackson Hole Symposium, particularly Fed Chair Powell’s comments, could significantly impact market sentiment and clarify the future direction of monetary policy.

BlackRock remain overweight in Japanese and U.S. equities despite recent volatility, as Japan’s market turbulence led the Bank of Japan to retract a hawkish stance, and U.S. macro data suggests a slowdown rather than a recession.

This week, markets will focus on key economic data releases, including US PPI and CPI, eurozone GDP, and UK CPI, along with earnings from major companies and Fed officials’ speeches, while navigating a volatile landscape marked by fluctuating equity markets and changes in global monetary policy.

Central banks are beginning to cut policy rates after rapid hikes, but persistent inflation pressures from fiscal deficits suggest higher-than-pre-pandemic interest rates; BlackRock prefer short-term government bonds and credit, while reassessing their equity overweight in Japan due to monetary policy uncertainty.